The Development Bank of Mongolia is poised for a major comeback, resuming policy lending after 4 years of restructuring and heavy reliance on debt repayment. In a strong signal of renewed market access, the bank marked its return to the public markets in June with its first US dollar deal since 2018.

DBM’s Dark Years: From Policy Powerhouse to Paralysis

The Development Bank of Mongolia (DBM), the country’s sole policy bank, was once a key financier of strategic infrastructure and export projects. But a 2021 special audit by the Bank of Mongolia exposed severe asset quality problems, with non-performing loans (NPLs) surging to around 60%.

• 💔 Since early 2022, DBM halted new lending entirely, shifting focus to debt recovery and refinancing. Over 8 years, it relied on private placements while working through a mountain of bad loans, severely limiting its ability to fulfill its development mandate.

The Turnaround: Capital, Bonds, and Reform

DBM has staged a strong comeback in 2026. The government injected ₮1.5 trillion in capital, while the bank successfully issued a $500 million 5-year senior bond in June, its first public US dollar bond since 2018, at a 7.2% yield, restoring its access to international capital markets.

• 🧣 Beyond its financial turnaround, Deputy CEO A.Enkhjin said the bank is also undergoing broader institutional reforms. A new law expected by year-end will strengthen governance, expand central bank oversight, and formalize government support through mandatory recapitalization when needed.

Back to Business: Lending Resumes

DBM has already approved several new loans this year, often in partnership with institutions like the IFC. Key deals include a $100 million contribution to a railway bypass project around Ulaanbaatar and financing for solar and battery storage initiatives. Furthermore, the bank plans to focus on energy, infrastructure, transportation, and export-oriented sectors to boost Mongolia’s competitiveness and energy independence.

The Road Ahead: Frequent Issuer Ambitions

DBM aims to become a regular issuer in the US dollar bond market, targeting at least another $500 million in 2027. It will also debut in the local MNT bond market later this year, reducing forex risk and appealing to frontier-market investors.

Overall… With commodity prices remaining strong and debt-to-GDP at around 40%, DBM sees favorable conditions for reviving policy lending. The bank also expects the medium-term economic outlook to remain positive, with stronger lending demand paving the way for more frequent bond issuances.